When investing in a portfolio of foreign currencies, the currencies represented within the portfolio are ideally highly positively correlated if the goal is to reduce exchange rate risk.

Question

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The currencies in the portfolio should ideally be negatively correlated or have low correlation to each other to reduce exchange rate risk. This means that when one currency decreases in value, the other currencies in the portfolio may increase in value, reducing the overall impact of exchange rate fluctuations.

When Investing in a Portfolio of Foreign Currencies, the Currencies